Budget

Budgets are determined by prior period actual expenses adjusted for inflation and other known factors.  The process generally consists of the following steps:

1. Obtain year-to-date operating expense information (or expense information for the preceding 12 months) for the entire Association (not individual buildings or common elements at this step).

2. If using year-to-date expense data, project full-year expenses by:

• Assuming monthly averages for the remaining months, and
• Manually adjusting for any known expense variations in these remaining months.

3. Steps #1 and #2 provide a baseline budget for the new year.

4. Calculate annual totals for each baseline expense account.

5. Review the total annual projected expenditure for each account (expense line item), and adjust as necessary for inflation, known increases/decreases, and other factors.  (These adjustments can be dollar values or percentages).

6. Compare expense totals with the prior year’s budget for reasonableness.  Try to stay within the rate of inflation.  (Note that budgets exceeding 115% of the prior year’s budget require membership approval.)

7. Determine which expenses are for the community shared common areas (Class B) and which are for individual association/building common areas and limited common areas (Class A).  Class B expenses typically include:

• Administration (accounting fees, audit, legal, office supplies, bank charges and board expense);
• Payroll (salaries, benefits, workers comp, payroll taxes and payroll processing);
• General Insurance (boiler & machinery, directors & officers, crime, island marine, umbrella & insurance finance charge);
• Common Repair & Maintenance;
• Security Contracts;
• Equipment Rental & Supplies;
• Maintenance & Janitorial Supplies;
• Lake/Irrigation Maintenance;
• Landscaping Contract & Services;
• Pool & Tennis (supplies & maintenance);
• Telephone; and
• Tax (federal income & FL condo tax).

8. Next, address the Class A (building common) expenses and determine how they are to be allocated across the 8 individual associations.  This is done by calculating the percent of total expenses (by expense line) consumed by each association/building during the prior 12 months (or year to date).  The primary Class A expense allocation percentages are calculated as follows:

• Property & Liability Insurance – From actual prior year P&L costs according to amount of insured value (see insurance broker’s binder).
• Wind Insurance – From actual prior year insurance costs per building (see insurance broker’s binder).
• Building Repair & Maintenance – Prior 12 months of actuals for each association/building.
• Licenses & Fire Inspection Fees –Prior 12 months of actuals for each association/building.
• Fire Alarms & Sprinklers – Prior 12 months of actuals for each association/building (excluding villas).
• Elevator Maintenance & Repair – Based on East and West elevator contracts.  West contract costs are split among the 6 West buildings.
• Generator Maintenance & Repair – 100% of this cost (including generator fuel) is allocated to the East.
• Trash Removal & Recycling – Split based on number of units per building. (Each unit pays 1/359th.)
• Pest Control – Split based on number of units per building. (Each unit pays 1/359th.)
• Utilities – Split all utility (water, electricity, sewerage, cable TV) expenses based on number of units per building. (Each unit pays 1/359th.)

9. Develop operating expense budgets for each of the 8 individual associations:

• Allocate all Class B (community shared common area) expenses to each association – Allocate 37.602% (135/359) to the East and 8.914% (32/359) to each pf the other 7 associations.
• Allocate Class A (building common) expenses using the percentages from Step #8 above.

10. You now have estimated Operating Expense budgets for the master association and each of the 8 individual/building associations.

It is a good idea to start gathering information needed to prepare the proposed budget 3-4 months before it becomes effective. This should provide plenty of time to compare historical budget versus actual performance, research the payment histories of association members, identify and talk to key people about the costs of equipment and services, and determine whether additional expenditures are needed to maintain the property, etc. Also, it’s important to provide sufficient time for Board review, owner budget correspondence, budget approval meeting, and coupon book printing/distribution.

The budget will be prepared by and/or reviewed by a Budget Committee, which will be chaired by the Treasurer and consist of at least five total members, only two of which can be Board Directors.

The Treasurer should call the first meeting of the Budget Committee in late September or early October. All meetings of the Budget committee that will be making recommendations to the board regarding the association budget are subject to the same provisions of a board meeting. This requires an adequate notice which must specifically identify all agenda items and be posted conspicuously on the condominium property at least 48 continuous hours before the meeting except in an emergency. Budget Committee meetings are open to all owners; however, due to the amount of detailed material to be covered, owner participation may be limited.

Budgets will be adopted at a board meeting held sufficiently prior to year end to assure that the new budget and maintenance fees can be distributed to condominium owners prior to the start of the new budget year. Note that this is an exception to the Jupiter Bay Bylaws, paragraph 9.4(g), that says “Copies of Class A Budgets and proposed assessments under the Class A Budget shall be transmitted to each Unit Owner in the Condominium for which the Class A Budget is formulated on or before September 1st preceding the year for which the Budget is made.”

Any meeting at which a proposed annual budget of an association will be considered by the Board or unit owners shall be open to all unit owners. At least 14 days prior to such a meeting, the Board shall hand deliver to each unit owner, mail to each unit owner at the address last furnished to the association by the unit owner, or electronically transmit to the location furnished by the unit owner for that purpose a notice of such meeting and a copy of the proposed annual budget. An officer or manager of the association, or other person providing notice of such meeting, shall execute an affidavit evidencing compliance with such notice requirement, and such affidavit shall be filed among the official records of the association.